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Optimal VWAP trading under noisy conditions

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  • Humphery-Jenner, Mark L.

Abstract

This article proposes an empirically tractable way to incorporate intra-day noise into a VWAP trading rule. In volatile markets, news arrives unexpectedly and rapidly. This should influence a trader's trading decisions. However, the literature has not incorporated such information into an algorithmic trading framework. Subsequently, this paper presents a Dynamic VWAP (DVWAP) framework that allows informed traders to utilize random news; and thus, improve trade-execution.

Suggested Citation

  • Humphery-Jenner, Mark L., 2011. "Optimal VWAP trading under noisy conditions," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2319-2329, September.
  • Handle: RePEc:eee:jbfina:v:35:y:2011:i:9:p:2319-2329
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    References listed on IDEAS

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    Cited by:

    1. Olivier Gu'eant & Guillaume Royer, 2013. "VWAP execution and guaranteed VWAP," Papers 1306.2832, arXiv.org, revised May 2014.
    2. repec:eee:finlet:v:21:y:2017:i:c:p:249-258 is not listed on IDEAS
    3. Dutt, Tanuj & Humphery-Jenner, Mark, 2013. "Stock return volatility, operating performance and stock returns: International evidence on drivers of the ‘low volatility’ anomaly," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 999-1017.
    4. Enzo Busseti & Stephen Boyd, 2015. "Volume Weighted Average Price Optimal Execution," Papers 1509.08503, arXiv.org.
    5. Humphery-Jenner, M., 2011. "High Frequency Trading, Information, and Takeovers," Discussion Paper 2011-047, Tilburg University, Center for Economic Research.

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